Aug. 2 (Bloomberg) -- Thai stocks slid, dragging the
benchmark index to a three-week low, on concerns that proposed
amnesty legislation and a planned demonstration against the
government will spark a new round of political tension.

The 507-member SET Index sank 1.2 percent to close at
1,420.94, its lowest level since July 10. The gauge lost 3.8
percent this week, the most in six weeks. Advanced Info Service
Pcl, the nation’s biggest mobile-phone operator, dropped 1.7
percent, Charoen Pokphand Foods Pcl, the largest meat producer,
slumped 3.6 percent.

Prime Minister Yingluck Shinawatra’s government imposed the
Internal Security Act on some parts of Bangkok from yesterday
through Aug. 10 to control protests. Parliament will debate next
week an amnesty bill that would exonerate protesters from both
sides involved in a series of demonstrations beginning from a
coup in 2006 that overthrew Yingluck’s brother Thaksin
Shinawatra as prime minister, until May 2011.

“The political risk has escalated,” Jessada Sookdhis,
Bangkok-based chief investment officer at CIMB-Principal Asset
Management Ltd., which oversees about $796 million of assets,
said by phone today. “Most investors will stay out of the
market until the situation is clear.”

Several anti-government organizations plan to hold
demonstrations on Aug. 4, National Security Council head Paradon
Pattanatabut said on July 31. Under the Internal Security Act,
officials are given authority to close roads, make arrests and
take action against any security threats. Peaceful
demonstrations are allowed under the law.

Baht Weakens

The baht dropped 0.3 percent to 31.40 per dollar after
touching 31.43 earlier, the weakest level since July 9,
according to data compiled by Bloomberg. The currency has
declined 0.8 percent this week, the most since the five-day
period ended June 21.

Overseas investors sold a net $85.2 million of Thai shares
this week through yesterday, the first weekly outflow in a month,
data compiled by Bloomberg show.

The SET Index has plunged 11 percent in the past three
months, the biggest decliner among Asia’s stock benchmarks, as
economic growth slows amid falling exports and weakening
domestic consumption. Stocks have also fallen as investors
withdrew money from emerging-market assets on concerns the U.S.
Federal Reserve may scale back its economic stimulus program.